As Supply Adjustments Struggle to Keep Up with Demand Growth, 1Q20 Graphics DRAM Price Sees Sharp Upturn, Says TrendForce

According to the newest analysis from the DRAMeXchange research division of TrendForce, server DRAM prices are expected to lead the uptrend in 1Q20 DRAM prices because the supply has been constrained by unstable yield rates of 1Xnm processes. Also, Graphics DRAM prices will see a corresponding sharp rebound. Graphics DRAM is more sensitive to demand change than other types of memory products, so its price fluctuations can be dramatic as well. With OEM clients raising their stock-up demand, Graphics DRAM contract prices are projected to increase by over 5% QoQ, the highest among all memory products.

As GPU and game consoles become higher-spec, demand for high-capacity GDDR6 rises

Regarding the overall market demand in 2020, the migration from GDDR5 to GDDR6 is underway at a rapid pace. In the graphics card market, the majority of NVIDIA’s shipments of graphics cards are based on the RTX platform, and most of these RTX cards use GDDR6 memory. AMD is also proactively destocking its older graphics cards with GDDR5 memory; the company has completely switched to GDDR6 for its latest NAVI series of GPUs. In the game console market, Sony and Microsoft are still relying on GDDR5 for PS4 and Xbox One, respectively. However, their next-generation consoles to be released in 2H20 (i.e., Sony’s PS5 and Microsoft’s Xbox Series X) will be equipped with GDDR6 memory. The memory capacity of these upcoming consoles could be raised up to 16GB, which is twice that of current mainstream graphics cards. Given these developments, demand is expected to exceed supply for graphics DRAM in 2020.

On the supply front, compared with other types of memory, Graphics DRAM has the highest production cost per chip. Hence, Graphics DRAM products were the first group of memory products to incur an operating loss for suppliers during the past few quarters when DRAM prices as a whole went on a steep dive. Therefore, the three dominant suppliers adjusted their product mixes and transferred some of their wafer capacity that was originally for Graphics DRAM to products with higher margins to maintain profitability. Currently, Graphics DRAM accounts for less than 6% of the industry’s overall output. Owing to a constrained supply and the abovementioned demand drivers, quotes are starting to stabilize. Because suppliers will not be able to make quick enough adjustments in their product mixes to immediately meet the rising demand, TrendForce forecasts a sharp rebound in the contract prices of Graphics DRAM in 2020, which will register perhaps the largest increase among products for different memory applications.

Supply of Graphics DRAM to grow by 15% in 2020

Regarding the competition among the three dominant suppliers in the Graphics DRAM market, Samsung is currently the clear leader, as it has the largest market share in production terms and is significantly ahead with respect to progress made in the design and client testing of GDDR6 products. SK Hynix and Micron, which trail behind Samsung, are neck and neck in the competition with similar market shares. However, Micron is faster than SK Hynix in the race to develop GDDR6 products and will soon reach the volume production stage for these next-generation chips. Therefore, Micron should become more competitive next year and widen its distance from SK Hynix in 2020.

TrendForce expects that the price for Graphics DRAM will rebound in the near future, as major game console makers adopt GDDR6 and increase memory capacity for their new products slated for 2H20. On account of these factors, the three dominant suppliers are likely going to gradually shift some of their wafer capacity back to Graphics DRAM. Hence, TrendForce believes there is a possibility that the YoY growth of the industry’s bit output for Graphics DRAM in 2020 will exceed 15%. Also, the projected bit growth for Graphics DRAM may be the second highest among different memory applications, only coming under the bit growth for server DRAM.